$70 billion investment required to meet aviation biofuel ambitions, although industry denies setting target
The Jatropha Curcas plant
Fri 13 May 2011 – An investment of up to $70 billion will be required to meet aviation biofuel targets, and is needed now, said Mitch Hawkins, the CEO of BioJet International, a company that aims to become a leading global feedstock producer and supplier of renewable jet fuel. Speaking at this week’s IATA Aviation Fuel Forum in Singapore, he noted the industry had set a target of 6 per cent of jet fuel coming from sustainable biofuels by 2020 but because of the lead times involved, he said the multi-billion investment would have to start flowing immediately to achieve the goal. The EU recently set out its ambitions for biofuels to make up 40 per cent of the overall aviation mix by 2050. Meanwhile, the Air Transport Action Group (ATAG), the industry umbrella organisation, has since clarified its position on aviation biofuel targets, saying they had not been set.
Hawkins told the conference he had based his calculation on the overall investment needed by using just one of the identified feedstocks of jatropha, camelina, algae or waste biomass. Using jatropha as the main feedstock, for example, would require an investment of around $30 billion to fund 2,000 farms of 10,000 hectares each, he said. Similarly, if it was camelina then an investment of $34 billion would be needed to cover 8,500 farms. In addition, he estimated $34 billion would be required to build 67 bio-refining plants at a cost of $350 million to $500 million each.
With recent public offerings raising funds of around $100 million each for major biofuels players, “the numbers just don’t wash,” said Hawkins.
BioJet, an Alternative Fuels Strategic Partner of IATA, itself received a $1.2 billion funding commitment from Equity Partners Fund in February and has since announced a number of deals. The company has just agreed to merge with Florida-based Abundant Biofuels, a leading international feedstock developer that controls over 4 million hectares in 10 countries in Asia, Africa and Latin America. Abundant claims to have sufficient nursery seed stock to develop jatropha plantations over the next three years capable of producing more than 20 million barrels of biofuel.
Commenting on the agreement, Abundant Group Chairman Charles Fishel said: “Competitors either focus solely on refining or only on the production of feedstock. BioJet will be one of the few, if not the only, international biofuels company that can control all of its feedstock. This provides BioJet with the ability to control its internal allocation of resources for a significant cost control advantage while other companies are subject to severe fluctuations in cost and availability of feedstocks.”
BioJet’s Hawkins said the Abundant merger would be a major step in his company’s goal of becoming the world’s largest owner and developer of feedstock for renewable jet fuel and green diesel. “Ownership and control of feedstock is the absolute key to all biofuels,” he added.
Two weeks ago, BioJet entered into a strategic relationship with Avjet Biotech (ABI), a developer of small distributive refining systems in the 10 to 15 million gallon-per-year range. Under the agreement, BioJet will use ABI’s patented RWR System to build refineries to produce aviation biofuels from native feedstocks at locations around the globe.
The RWR System uses a thermal catalytic process to refine any triglyceride (the main constituent of vegetable oils and animal fats) into aviation biofuels. The technology is under development for sale as a small distributive refining system to global entities or foreign governments that aspire to produce aviation biofuels from native feedstocks, says ABI. Last month, ABI announced that it had concluded a licence agreement to secure exclusive rights to a technology portfolio developed at North Carolina State University for producing biofuels from triglycerides and for producing products from genetically modified marine microalgae.
As the exclusive licensee for the commercialisation of these technologies, ABI will sell stock and use the funds raised to reimburse the university for its investment in patent applications, as well as allocate development capital to create a continuous production model for the biofuel refining system. “This agreement is a major piece in our plan to provide aviation biofuels internationally,” said ABI CEO Don Evans.
Meanwhile, the Air Transport Action Group (ATAG), which represents the aviation industry on environmental issues, has said that there is at present no actual industry target for the use of biofuels. In its March 2011 publication ‘Powering the Future of Flight’, ATAG said the sector was “striving to practically replace 6% of our fuel in 2020 with biofuel – we hope this figure can be higher.” However, ATAG’s Haldane Dodd cautions against using the figure as an industry commitment.
"Aviation biofuels are at a tipping point in the next few years. We will have approval to use a new generation of biofuels on passenger flights in the coming months. The big challenge now is commercialisation. We need to get significant quantities of cost-competitive, sustainably-sourced biofuel coming on stream in order to fulfil our broader climate target of reducing emissions by 50% by 2050,” he told GreenAir Online.
“The big question is how much can we get and by when? At this stage, we just don’t know. We have used the 6% figure, certainly not as a goal or target, but by way of saying this much could practically be produced by 2020 – given the right fiscal incentives and signals, particularly from governments.
“You have to remember this is an industry at a very early stage, but it is evolving very rapidly – from nothing to certification in just over three years. Already we have airlines signing forward purchase agreements and indeed contracts with biofuel suppliers. The investment community is starting to wake up and increasing interest is being shown to invest in this new energy source. Governments are also identifying aviation as the most effective place to use sustainable biofuels. Europe, in its recent transport white paper, has identified that biofuel use should be prioritised for aviation because other transport modes have alternative energy sources.
“We have identified in our ‘Powering the Future of Flight’ document a set of steps that governments can take to help get aviation biofuels off the ground. We are not necessarily looking for subsidies – unlike many oil companies – but we do want sustainable aviation biofuels to be given a boost, particularly in the early years to help bring the cost differential down.
“It is very true that a lot of investment is needed to get to 1% biofuel use in aviation, let alone 6% or 40%. We fully expect that. But last year, airlines spent $140 billion on fuel. This year, it could be as high as $175 billion and we are not seeing any relief in the medium term from oil price rises. Over $35 billion price differential year-on-year would say that there is significant scope for development of alternative sources. There is a big market out there for those that want to invest.
“The important thing is that there is no actual industry-wide target for biofuels as of yet.”
A major US-led initiative to promote aviation biofuels on the international stage will take place during next month’s Paris Air Show, which aims to showcase current developments and bring together suppliers, airline customers, investors and government representatives. A number of leading biofuel companies are expected to take part and an Investors’ Day is planned for Wednesday, 22 June.